Managers should have wide-ranging knowledge of a diversity of subjects — human resources, marketing, accountancy — and business newspapers and journals are an effective aid for management education, said Mr K. M. Padmanabhan, Senior Partner, Srinivas and Padmanabhan, Chartered Accountants, while delivering a Business Line guest lecture at the Department of Management Studies, C. Abdul Hakeem College of Engineering and Technology, Melvisharam, recently. The meet was presented by Central Bank of India.
In the old days banks in general lent based on assets, whereas today lending is based on the projected cash flow of the assets. He said whatever be the business, cash flow is very important.
The economy in the olden days was based on cash whereas today we have moved towards a credit economy. Accounting is based on the concept of a growing concern and its fundamental principle is based on cash flow. Stability is critical for an organisation as it brings trust and continuous cash flows.
But the sunrise industries are all in a state of uncertainty. As the future is uncertain and that has an impact on the cash flow, we have moved towards a credit economy.
Pricing should not only be based on the cost of production but should also include the cost of acquiring. While moving from production to trading, the contributor and the consumer, the two ends of the value chain suffer, while the middlemen enjoy the profits.
In the earlier days, purchase price plus margin used to be the sales price, whereas today, sales price minus profits helps determine the cost price. The sales price nowadays is determined by the consumer, which was earlier done by the creator.
Profit should be more than the cost of the capital and in the profit and loss account, sales, as it is mentioned at the top, is called the top line, and profits, which are mentioned at the bottom, is called the bottom line. Profits are no longer a residue but have become a target, which are, in turn, making organisations move towards lean and mean manufacturing processes. He concluded by saying that happiness is a reflection of the true cash flow. Dr D. Thandapani, Dean and Director, MBA programme, attended the event.